Allowed

M/S Aegis Customer Support Services Pvt. Ltd. Thru. Vice President (Hr) Mr. Ajoy Kumar Singh v. Recovery Officer Employees State Insurance Corporation Lko. U.P. and Another

Allahabad HC28 Nov 2024/5767/2024

Case brief

AI extract

What is this about?

This High Court quashed an ESI demand order dated 24.04.2018 against a transferee company for dues pertaining to the transferor. The court held that since the transferee had a separate ESI code and the transfer was known, the order violating Section 45-A's assessment and hearing mandates was unsustainable, leading to the refund of Rs.3.77 crore.

What did the court decide?

The impugned order dated 24.04.2018 is quashed and the recovered amount of Rs.3,77,41,152/- is directed to be refunded with liberty to reassess after a proper hearing.

M/S Aegis Customer Support Services Pvt… — Pension and Retirement Benefits | Allahabad HC (2024)

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Neutral Citation No. - 2024:AHC-LKO:79091

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Court No. - 7

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Case :- WRIT - C No. - 5767 of 2024

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Petitioner :- M/S Aegis Customer Support Services Pvt. Ltd. Thru. Vice President (Hr) Mr. Ajoy Kumar Singh Respondent :- Recovery Officer Employees State Insurance Corporation Lko. U.P. And Another Counsel for Petitioner :- Ramesh Kumar Mishra,Adhyatm Singh,Ashutosh Verma,Aviral Raj Singh,Dhruv Kumar Singh,Palash Banerjee,Ritwick Rai,Vaibhav Tiwari Counsel for Respondent :- Shishir Pradhan

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Hon'ble Pankaj Bhatia,J.

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Heard Sri Dhruv Mathur, Advocate assisted by Sri Vaibhav Tiwari, learned counsel for the petitioner, Sri Shishir Pradhan, learned counsel for the respondent and perused the material available on record.

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The present petition has been filed by the petitioner seeking refund of an amount of Rs.3,77,41,152/deducted from the petitioner's current account maintained with Yes Bank, Mumbai in execution of the demand notice dated 06.07.2018 contained in Annexure No. 10 to this writ petition.

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The facts in brief are that the petitioner company is a company registered under the Companies Act and was served with Prohibitory Order dated 26.06.2024 as well as

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the recovery notice dated 12.06.2024. It is argued by the

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counsel for the petitioner that a company in the name of M/S AEGIS Limited (hereinafter referred to as transferor company) existed with which, the petitioner company which is known as M/S AEGIS Customer Support Services Private Limited (hereinafter referred as "transferee company") entered into a business sale agreement on 21.03.2017, according to which, the entire business along with the existing employees as were referred in the agreement were transferred to the transferee company. It is stated that prior to transfer, the transferor company cleared off their dues up to 30.01.2027 in respect of ESI share of the employees working with the transferor company and subsequently, the petitioner company took charge on 01.09.2017 and on an application moved, they were allotted a new ESI Code vide letter dated 02.09.2017. It is stated that subsequent to the petitioner company taking over the employees on 01.09.2017, their share of dues was deposited by the petitioner company in the manner as indicated in paragraph no. 9. It is stated that despite, the petitioner company having paid its dues, an order was passed against the transferor company having separate ESI Code on 24.04.2018 which is contained in annexure no.

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9, wherein a demand of Rs.21189168/- was assessed

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against the transferor company. It is stated that the said transferor company against the order dated 24.04.2018 preferred an appeal under Section 45 AA of the ESI Act and some pre-deposit were also made, however, as the pre deposit was not made, the appeal was dismissed. Subsequently, the said transferor company filed a case under Section 75(1)(G) of the ESI Act for quashing of the order dated 24.04.2018, which is contained in annexure no. 12, the same was also dismissed in default on 08.12.2024. It is stated that a recovery notice dated 12.06.2024 was issued by the Recovery Officer of the respondent mentioning the name of the petitioner as well as the transferor company. The said recovery notice is on record as annexure no. 4. In terms of the said recovery notice, the amount of Rs.22603330/- for the period September 2017 up to December 2017 was sought to be recovered along with the interest, etc from the transferor company as well as from the petitioner. As the petitioner did not file a reply to the same, a further order was passed against the petitioner attaching its account through Prohibitory order dated 26.06.2024, the amount mentioned in the said Prohibitory order was Rs.37727220/-. In terms of the said Prohibitory order the amount was deducted from the current account of the

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petitioner maintained with Yes Bank, Mumbai.

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The contention of the counsel for the petitioner is that no demand whatsoever was ever created against the petitioner in respect of its ESI dues, the demand allegedly pertained to the period from September 2017 up to December 2017, which is a date subsequent to the petitioner entering into an agreement with the transferee company and taking control of the company on 01.09.2017. It is further argues that in case any demand was there against the petitioner company for the period subsequent to 01.09.2017 as is evident from the recovery notice, it was incumbent upon the respondent to have assessed the demand in terms of the prescription contained in Section 45-A of the Act. He further relies upon the said provision contained in Section 45-A to argue that in the process of determination of contribution, it is incumbent upon the respondent to provide an opportunity of hearing as is contained in the first proviso to Section 45-A, which according to the petitioner was not done. He, thus, in sum and substance, argues that the petitioner was not liable to pay such a huge amount without there being any assessment and without there being any liability of the petitioner company to pay the said amount, which according to the petitioner are in

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violation of Article 300-A of the Constitution of India. He states that as the recovery in pursuance to the ESI Act can be effected only in accordance with law and prima facie, in terms of the order, the same has been recovered against the petitioner without any authority of law and thus, violates the rights of the petitioner enshrined under Article 300-A of the Constitution of India. He argues that on account of extraction of money without there being any assessment against the petitioner, the petitioner is suffering an irreparable hardship and is suffering financially, as such, the writ petition deserves to be allowed.

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Sri Shishir Pradhan, learned counsel appearing on behalf of the respondent strongly opposes the writ petition by arguing that the fact, with regard to transfer of business was never disclosed to the respondent through any communication. He further argues that the demand as was created through an order dated 24.04.2018 was against the transferor company, which was duly contested by them by filing an appeal and thereafter proceeding under Section 75 and having failed in their attempt to challenge, the petitioner has been set up to defend the same. He further argues that in terms of the mandate of Section 93 A, it is the transferee company, which is also

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liable to pay the dues even if the same are of the transferor company. He lastly argues that the petitioner may be relegated to the remedy of appeal under Section 45-AA of the Act and the issue can be decided in the appellate forum. Reliance is placed upon the judgment of the Calcutta High Court in the case of Premchand Jute and Industries Pvt. Limited and another versus Employees State Insurance Corporation and others, (2020) 08 CAL CK 0037, wherein reliance is placed in paragraph nos. 20 & 28, wherein the liability of the tranferee company was dealt with by interpreting Section 93-A of the ESI Act.

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In rejoinder, the counsel for the petitioner draws my attention to the proceedings filed by the transferor company under Section 75(1)(G) of the ESI Act, wherein in paragraph no. 4, it was specifically disclosed that the company has sold all its business to the transferee company. He also draws my attention to the document contained in annexure no. 6 of Writ Petition No. 5502 of 2024 filed by the transferor company, wherein it was specifically disclosed that the transferor company had informed the respondent corporation with regard to transfer of business as well as the allocation of new number by the ESIC. He thus argues that it is wrong on

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the part of the respondent to allege that the fact with regard to transfer were never informed. He also argues that the petitioner was given a separate number which is evident from the own communication of the respondent dated 02.09.2017 contained in annexure no. 7. He lastly argues that argument with regard to the Section 93-A, merits rejection as in the demand itself, the period for which the demand was quantified was mentioned as September 2017 up to December 2017 and the same could not have been for the transferor company.

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Considering the submissions made at the Bar, the dues were quantified against the transferor company on 24.04.2018 for the period September 2017 up to December 2017, despite the fact that the respondents were aware of the transfer, the demand was created against the transferor company even after there being allocated separate ESI code number and the said amount is sought to be recovered from the petitioner. The order dated 24.04.2018 and subsequent recovery order do not indicate as to how the demand was quantified and whether any exercise as referred to under Section 45-A was done, it also does not bear that the petitioner was ever given an opportunity of hearing prior to passing of the demand order.

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Considering the fact that the information with regard to the transfer of company, the allocation of new ESI code to

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the petitioner as well as the communication dated 21.10.2017 and communication dated 02.09.2017, it is clear that the respondents were aware of the transfer and had infact allocated a new code to the petitioner, however, without hearing the petitioner, the orders were passed, the said order does not even record the manner of quantifying the demand. Thus, the order dated 24.04.2018 is clearly contrary to the mandate of Section 45-A of the ESI Act and the same also suffers from the vice of violation of principal of natural justice as no opportunity of hearing was granted to the petitioner, thus there being no following of the mandate of Section 45-A of the ESI Act and there being non compliance of principal of natural justice, the order dated 24.04.2018 for the period September 2017 up to December 2017 cannot be sustained and is quashed. The amount recovered from the accounts of the petitioner are clearly without any authority of law and thus are liable to be refunded to the petitioner. The amount as attached from the account of the petitioner amounting to Rs.3,77,41,152/- is directed to be returned to the petitioner within a period of one month from today. The respondent corporation shall, however,

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be at liberty to initiate proceedings for re-assessment, if so advised, in accordance with law after giving opportunity of hearing to the parties.

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The writ petition is finally disposed of in terms of the above.

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Order Date :- 28.11.2024 Arun

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Digitally signed by :- ARUN KUMAR High Court of Judicature at Allahabad, Lucknow Bench

M/S Aegis Customer Support Services Pvt. Ltd. Thru. Vice President (Hr) Mr. Ajoy Kumar Singh v. Recovery Officer Employees State Insurance Corporation Lko. U.P. and Another

Case brief

What is this about?

What did the court decide?

M/S Aegis Customer Support Services Pvt. Ltd. Thru. Vice President (Hr) Mr. Ajoy Kumar Singh v. Recovery Officer Employees State Insurance Corporation Lko. U.P. and Another

Case brief

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What did the court decide?

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